TIDMXAR
RNS Number : 8404M
Xaar PLC
19 September 2023
19 September 2023
Xaar plc
2023 INTERIM RESULTS
STRATEGIC PROGRESS WITH PERFORMANCE ON TRACK
Xaar plc ("Xaar", the "Group" or the "Company"), the leading
inkjet printing technology group, today announces its unaudited
interim results for the six months ended 30 June 2023.
Financial Summary:
H1 2023 H1 2022 Change
Continuing Operations
---------- ---------- -------
Revenue GBP34.5m GBP36.6m -6%
---------- ---------- -------
Gross profit GBP13.8m GBP14.5m -5%
---------- ---------- -------
Gross margin % 40% 40%
---------- ---------- -------
Gross R&D investment GBP2.6m GBP3.3m -21%
---------- ---------- -------
Adjusted EBITDA(1) GBP3.5m GBP3.0m 17%
---------- ---------- -------
Adjusted profit before
tax(1) GBP1.8m GBP1.4m 29%
---------- ---------- -------
Loss before tax (GBP1.8m) (GBP0.3m)
---------- ---------- -------
Loss/profit for the (GBP1.3m) GBP0.7m
period after tax
---------- ---------- -------
Basic (loss)/earnings
per share (1.7p) 0.9p
---------- ---------- -------
Total Operations
---------- ---------- -------
Loss before tax (GBP1.8m) (GBP0.6m)
---------- ---------- -------
(Loss)/profit after (GBP1.3m) GBP0.4m
tax
---------- ---------- -------
Basic (loss)/earnings
per share (1.7p) 0.5p
---------- ---------- -------
Net cash at the period
end(2) GBP7.3m GBP12.7m -42.5%
---------- ---------- -------
1 - EBITDA is calculated as statutory operating profit before
depreciation, amortisation and impairment of property, plant and
equipment, intangible assets and goodwill. Adjusted EBITDA is
calculated as EBITDA excluding other adjusting items as defined as
follows. Adjusted Measures exclude the impact of share-based
payment charges, exchange differences relating to intra-group
transactions, gain on derivative financial instruments,
restructuring and transaction expenses, research and development
expenditure credit, fair value loss or gains on financial assets at
FVPL, amortisation of acquired intangibles, and discontinued
operations as reconciled in note 2.
2 - Net cash at 30 June includes cash, cash equivalents and
treasury deposits.
Figures and percentages included in this report are subject to
rounding adjustments arising from conversion to GBPmillions from
actual figures. Accordingly, figures shown for the same category
presented in different tables may vary slightly, and figures shown
as totals in certain tables may not be an arithmetic aggregation of
the figures that precede them.
Financial highlights
-- Revenue of GBP34.5 million in line with expectations
-- Group adjusted profit before tax for the period year up 29% to GBP1.8 million
-- Gross margin of 40% is in line with H1 2022, driven by
targeted favourable sales mix and cost management offsetting the
factory upgrade investment
-- R&D spend of GBP2.6 million, equating to 8% of Group
Revenue, underscores the continued investment on the product
roadmap, with a focus on the ImagineX platform
-- Robust balance sheet with net cash of GBP7.3 million (2022:
GBP12.7 million) following planned investment in working capital to
ensure customer demand is met
Strategic and operational highlights
-- Increasing number of customers developing products, with
additional product launches expected in H2 2023 and expected
recovery in key markets
-- Commercial partnership with Quantica announced on 5 July 2023
enhances the Group's leading position in jetting highly viscous
fluids
-- Phase 1 of factory efficiency programme completed on time and within budget
-- Product Print Systems business ("EPS") delivered a strong
performance in the period with both revenue and margin growth
-- Sustainability roadmap embedded within the business with
clear strategy to reach 'net zero' by 2030
John Mills, Chief Executive Officer, commented:
" We remain focused on the successful delivery of our strategy
and taking advantage of the significant opportunities that will
drive profitable growth. We have seen continued positive momentum
across the business, with increased visibility over customer
product launches and a robust pipeline.
Our products, especially Aquinox, are generating strong interest
from existing and new customers, underlining our leadership in
printing highly viscous fluids.
Phase 1 of our factory efficiency programme has been
successfully completed on time and within budget positioning us to
deliver increased efficiency and capacity, whilst realising
significant cost savings.
Whilst being mindful of the external environment, we remain
optimistic about the future with encouraging signs of recovery in
key markets and the business in good shape to make further progress
and to deliver a full year performance in line with our
expectations. With a substantial market opportunity and the
progress made, we remain well positioned to realise our exciting
potential."
Contacts:
Xaar plc
Ian Tichias, Chief Financial Officer +44 (0) 1223 423 663
John Mills, Chief Executive Officer
Teneo +44 (0) 207 353 4200
Giles Kernick
Olivia Lucas
A presentation for analysts and investors will be held via
webcast and conference call at 09:00 today. For further details,
please contact Xaar@teneo.com
Significant strategic progress
Xaar has delivered a good performance in the last six months in
line with our expectations. We continue to execute our strategy of
delivering compelling products in each of our market segments and
remain focused on the significant opportunities that will drive
profitable growth.
This strategy is now delivering with our products, especially
Aquinox, generating strong interest from both existing and new
customers underlining our leadership in jetting highly viscous
fluids which, alongside other advantages, provide significant
sustainability benefits, as well as reducing our customers' time to
market.
Our positive momentum has continued during the reporting period.
We have seen an increase in the number of customers adopting Xaar
technology and we now have clearer visibility of their product
launches, which will drive performance in the second half of this
year and beyond.
Phase 1 of our factory upgrade has been successfully completed
on time and within budget, positioning us to deliver increased
efficiency and capacity, whilst realising significant cost savings.
Further phases of development, expected to start in early 2025,
will see increased modernisation of our manufacturing facilities
leading to greater efficiencies and scale potential.
We have seen continued good performance from EPS, Megnajet and
FFEI, with EPS especially continuing to drive excellent revenue and
profit growth. As part of our decision to strategically withdraw
from the Life Science part of FFEI, we sold non-core IP assets
delivering a profit of GBP2.0 million.
Continued strong trading - in line with expectations
We have delivered performance in H1 2023 in line with management
expectations, further demonstrating the operational and strategic
progress across the Group. The Group has increased resilience with
performance driven by all elements of the business, and an ongoing
focus on cost control and careful cash management.
Revenue for the period was GBP34.5 million representing a
decrease of 6% against H1 2022.
The Printhead business has a clear customer-focussed commercial
strategy, and we are pleased to have grown our customer base and
maintained our market share. The economic challenges globally,
particularly rising interest rates, have directly impacted capital
equipment purchases by some customers in the period. The
performance also reflects the tough comparative period in Q1 2022
where demand in China was high prior to the implementation of COVID
related restrictions.
Revenue for the Printhead business was relatively flat compared
to H2 of last year and we are now seeing encouraging signs of
recovery, with the lifting of restrictions in China along with an
increase in customer product launches that incorporate Xaar's
technology, which we expect to drive demand for printheads.
We have been able to demonstrate the strength of our technology
in market sectors beyond Ceramics, especially the key growth area
of 3D printing, and continue to see strong customer engagement
where we have a competitive advantage by enabling customers to
reduce their own development times.
EPS delivered an excellent performance. Revenue increased 16%,
against the equivalent period of 2022, with growth across all its
product lines, driven by digital inkjet single pass machines. We
have increased customer engagement with a strong sales pipeline
which is driving revenue growth, higher gross margins, and strong
profitability.
FFEI and Megnajet, continue to perform well. These businesses
provide us with an expanded product range enabling real traction
and opportunity in the printbar and print engine markets, along
with fluid management systems.
Our plan has been to focus on products that support our core
strategy. As a result, we are considering options to withdraw from
the non-core Life Sciences part of the FFEI business, and the sale
of IP in this area is part of this process. We delivered a one-off
profit of GBP2.0 million through this sale which helped offset the
one-off impact of Phase 1 of our factory re-organisation at
Huntingdon completed in Q1.
Gross margin was maintained at 40% despite inflationary cost
pressures and the closing of the Huntingdon factory for two months
to complete Phase 1 of the operational re-organisation. This was
driven by an increase in Printhead of 3 ppts to 44% helped by a
favourable sales mix, and EPS which increased Gross Margin to 40%
from 39% in the comparative period.
Group Adjusted EBITDA grew from GBP3.0 million to GBP3.5 million
driven by a positive adjusted EBITDA in each of our businesses (EPS
adjusted EBITDA of GBP1.7 million (H1 2022: GBP1.2 million), FFEI
adjusted EBITDA of GBP2.3 million (H1 2022: GBP0.5 million), and
Megnajet adjusted EBITDA of GBP0.4 million (H1 2022: GBP0.3
million)) other than Printhead which, due to the fall in revenue
and the Q1 closure of the factory, posted negative adjusted EBITDA
of GBP0.9 million (H1 2022: positive GBP0.9 million).
Group adjusted profit before tax for H1 2023 was GBP1.8 million,
an increase when compared to H1 2022 (GBP1.4 million) and H2 2022
(GBP1.4 million).
Strong balance sheet and operational investment
The Group retains a strong balance sheet and cash position. Net
cash at 30 June 2023 was GBP7.3 million, representing a net outflow
of GBP1.2 million in the period.
During this period we invested GBP3.2 million in inventory
allowing the Printhead business to increase its holding of finished
goods. This systematic approach over the last 12 months gives us
confidence that we can deliver on customer demands for the
remainder of the year and into 2024. We believe that we are winning
business through the advantage of offering shorter lead times than
our competition which ensures we are well placed to capitalise on
the commercial opportunities we have.
In addition, we have invested GBP1.1 million (H1 2022: GBP1.5
million) in operational upgrades along with the factory upgrade
completed in March 2023.
R&D investment in innovation is critical to the ongoing
success of the business, and we will continue to invest in our
R&D capabilities across the Group to ensure our technology
remains market leading. During H1 2023 we invested GBP2.6 million
(H1 2022: GBP3.3 million). The continued strong cash generation
across the business and prudent cash management has enabled us to
make these investments. We will maintain our disciplined approach
to balance sheet management, and it remains a key priority to allow
for further investment in the business focussing on operational
capability.
In June 2023 we successfully agreed a Revolving Credit Facility
(RCF) of GBP5 million with our lead bank, HSBC, which allows for
accelerated investment in the business and our operational
capability.
Operational improvements driving greater efficiency and
increased capacity
Operational improvements have been made by investing in our
manufacturing facilities to increase efficiency and lower costs.
The first phase of this programme has now been completed and the
Huntingdon factory re-organisation was completed in early 2023 on
time and under budget.
This will enable us to operate more efficiently, increase
capacity and yields whilst crucially generating significant cost
savings, especially in reducing our energy consumption.
Accordingly, this investment will deliver a rapid return and
payback in less than a year.
As a result of this investment, we will increase capability and
capacity enabling us to take advantage of the opportunities which
we expect to drive our future growth.
This is the first phase of our efficiency upgrade programme, and
we plan to invest a further GBP10-15 million over the next three to
four years which we intend to fund through operational cash
generation. The next phase of investment is expected to take place
in early 2025, depending on business needs, which will result in
more modern, efficient, and environmentally beneficial
manufacturing facilities across the business.
Significant market opportunity
We have a strong proposition across our five key market sectors.
Our digital inkjet technologies provide compelling propositions to
transform print processes across a wide range of applications, and
we can supply our customers with the products they need to develop
their printers. This means we have significant opportunities for
complementary revenue, incremental to printhead sales, where we can
shorten our customers' product development time to market.
The medium and long-term opportunity for the business remains
significant. Whilst we already have good market share in core,
mature markets such as Ceramics and Coding & Marking, further
growth opportunities exist because of our market leading
technologies and clear competitive advantage.
During 2023 we have made the most significant progress in 3D
printing, where our ability to print high viscosity fluids is
transforming the industry. The 3D printing sector is experiencing a
greater level of customer product launches, thereby providing
greater revenue potential opportunity for our products than
previously expected.
Historically Xaar has almost exclusively operated in the B2B
(Business to Business) area across our product ranges and
applications, however there is an emerging opportunity for 3D
printing in the B2C (Business to Consumer) sector where we can
facilitate growth.
We are partnering with established system providers for our Xaar
Irix printhead to enable a new generation of full colour,
inkjet-based desktop 3D printing systems that are higher resolution
and more flexible than the existing technologies. We anticipate
this new generation of 3D printers to be launched over the next six
to twelve months.
We have seen increased customer engagement as our printhead
product range has expanded and our ability to offer a broader
solution to customers with fluid management systems and printbars,
as evidenced by the increasing number of customers developing
machines with our products. Both our current product offering and
our products in development will help drive our success in meeting
this customer demand.
This is demonstrated with the high level of customer interest
and adoption of Aquinox, our new water-based fluid printhead with
an increased number of development kits sold in the period. We
expect to see customer product launches incorporating Aquinox
during H2 this year.
By providing an integrated solution for customers whereby they
can access more of the printing ecosystem, we help our customers
take advantage of the inkjet opportunity and working with Xaar
means a higher chance of success by being faster to market, and
therefore, making our customers' investment more profitable.
Ultimately this will help us in our overriding strategy to sell
more printheads and gives the business increased resilience over
volatility in any given market.
Product development and increased capability
The market opportunity for Xaar printheads is significant. We
have a unique roadmap of product development to ensure we offer an
increasingly vertically integrated commercial strategy to
capitalise on this market opportunity.
Our Xaar 2002 printhead has double the resolution of our
competitors giving the ability for very high-quality print and
incorporates our key technologies which enable printing of very
challenging fluids in harsh production environments.
The Xaar Irix remains the flagship product in the Coding and
Marking and Direct-to-Shape sectors. It delivers increased throw
distance whilst maintaining print quality and along with our Xaar
50X printheads means we are maintaining our position in Coding and
Marking and have several opportunities in the Direct-to-Shape
market.
The recently launched Aquinox printhead is positioned to drive
adoption in Packaging and Textiles markets. The response to the
product has been exceptional due to its ability to print high
viscosity water-based inks. This gives customers the opportunity to
use less energy, with a higher throughput, and more vibrant colours
and we expect the first product launches of textile printers to
happen in H2 2023.
The already successful ImagineX platform will deliver improved
features over the next few years which will provide significant
enhancements to the current portfolio, including:
-- substantially improved speed and throughput (frequencies up
to 150kHz, equivalent to a threefold increase in speed compared to
current products),
-- increased throw distance to improve image quality on curved surfaces,
-- increased robustness to improve the life of the printhead and maintain image quality,
-- higher viscosities enabling a broader range of fluids to be printed (above 100cP), and
-- higher resolutions (up to 1440 dpi).
These features will help strengthen our position in markets
where we are already well represented and will drive improved
adoption in several markets where we are currently not
participating.
The enhancements in our product roadmap support our customers
with a clear path to upgrade their products and maintain their
product differentiation.
Continued commitment to sustainability
We continue to make significant progress on ESG and the Group's
Sustainability Roadmap. The Board remains committed to the business
becoming carbon net zero by 2030.
We are passionate about delivering solutions and products for
our customers that are cleaner and better for the environment. Our
products are well placed to deliver significant benefits
commercially and environmentally for our customers through
reductions in power consumption and water usage.
We also seek to have a wider positive impact on society by
understanding and prioritising employee needs, doing business
responsibly, and reaching out to our local communities. All our UK
sites have now moved to 100% renewable energy. All printhead
product packaging is fully recyclable. Our Apprentice Programme is
well developed across the business, and we continue to support
activities promoting STEM (Science, Technology, Engineering and
Maths) subjects amongst young people as well as several sponsorship
programmes supporting university students and industry
placements.
Digital inkjet printing is inherently more sustainable compared
to traditional analogue printing with a smaller carbon footprint.
It reduces and prevents excessive waste and uses less energy due to
the ability to print short runs or direct-to-shape. With Ultra High
Viscosity Technology and TF Technology ink recirculation, Xaar
printheads are capable of printing very viscous fluids which, in
the textiles sector for example, results in a reduction in energy
used in intensive drying processes. We are passionate about
continuing further adoption and understanding of the environmental
benefits our products can bring to customers.
Outlook
While remaining vigilant to broader macroeconomic conditions,
the Board remains confident of delivering full year results in line
with its expectations.
Despite the lifting of COVID related restrictions in China,
sales volumes in the Printhead business continue to be affected,
but we expect market conditions in the sectors in which we operate
to improve during H2 2023 and this, coupled with increased customer
product launches, will drive higher demand for Xaar printheads.
We have maintained our policy of increased investment in
inventory during 2022 and 2023 to ensure the Group is well placed
to capitalise on our targeted opportunities and satisfy customer
demand.
There is positive momentum in the business with strong customer
interest and customer engagement. Our strategy to diversify across
a range of market sectors means further customer product launches
are expected in 2024 providing confidence in delivering our
medium-term growth plans.
Business Performance
Revenue
Group revenue growth
GBPm Var Var
H1 2023 H1 2022 % H2 2022 %
Printhead 17.6 20.7 -15% 18.3 -4%
-------- -------- ------ -------- -----
EPS 10.7 9.2 +16% 10.4 +3%
-------- -------- ------ -------- -----
FFEI 4.8 6.1 -21% 5.5 -13%
-------- -------- ------ -------- -----
Organic growth H1 2023
vs H1 2022 33.1 36.0 -8% 34.2 -3%
-------- -------- ------ -------- -----
Megnajet 1.4 0.6 +133% 2.0 -30%
-------- -------- ------ -------- -----
Total Revenue 34.5 36.6 -6% 36.2 -5%
-------- -------- ------ -------- -----
Revenue for the Group was GBP34.5 million for the first half of
the year, representing a year-on-year decline of GBP2.1 million (H1
2022: GBP36.6 million).
These results have been achieved in a difficult trading
environment. Restrictions arising from COVID-19 in China have now
been lifted, however, there has been an ongoing impact on Printhead
revenue. This together with rising costs and interest rates have
impacted capital equipment sales globally. Printhead business unit
revenue declined GBP3.1 million when compared to the same period
last year. Q1 2022 revenue included a strong business performance
from sales in China, driving this variance. When compared to H2,
Printhead revenue is close to flat, despite the weak demand
generally for capital goods which is a strong indicator of the
progress the business has made with customer engagement. EPS
revenue increased 16% when compared to H1 2022 and 3% to H2 2022,
demonstrating continued excellent progress.
Printhead
Printhead Revenue by Sector
GBPm H1 2023 H1 2022 Var % H2 2022 Var %
Ceramics & Glass 8.0 9.8 -18% 7.1 +12%
------- ------- ----- ------- -----
C&M & DTS 5.1 6.9 -26% 5.8 -13%
------- ------- ----- ------- -----
WFG & Labels 1.7 1.8 0% 3.0 -40%
------- ------- ----- ------- -----
3D Printing & AVM 2.6 1.9 +37% 2.0 30%
------- ------- ----- ------- -----
Packaging & Textile 0.2 0.1 +100% 0.4 -50%
------- ------- ----- ------- -----
Royalties, Commissions
& Fees - 0.2 -100% - -
------- ------- ----- ------- -----
Total 17.6 20.7 -15% 18.3 -4%
------- ------- ----- ------- -----
Printhead revenue for the half year decreased GBP3.1 million to
GBP17.6 million (H1 2022: GBP20.7 million), representing the
current economic challenges and a strong comparative reporting
period in 2022 due to greater sales in China.
Printhead revenue in EMEA was GBP11.1 million compared to
GBP11.2 million in H1 2022, although this is an increase compared
to GBP9.5 million in H2 2022 which is pleasing and reflects on our
customer engagement across our market sectors, whilst revenue in
the Americas fell. Performance in Asia, and China in particular,
has been impacted by COVID-19 restrictions. Restrictions were not
implemented in China until Q2 2022, and before then we saw strong
Printhead revenue. Although restrictions are now lifted, the
economic challenges faced in China are impacting sales of
printheads, and we have seen orders from our customers delayed as
their own product development times are taking longer. This has
particularly impacted revenue in the Ceramics sector (albeit with a
recovery in revenue when compared to H2 2022), and Coding &
Marking (C&M). Whilst this is disappointing, the underlying
market demand remains, we have retained market share, and we are
confident in the medium term of returning to the previous growth
levels. The number of customer product launches in the coming 12
months is increasing which drives this confidence.
3D printing and Additive Manufacturing (AVM) has seen consistent
growth which is pleasing as this reflects our overall customer
strategy and enhanced product portfolio.
EPS
EPS Revenue by Sector
GBPm H1 2023 H1 2022 Var % H2 2022 Var %
Digital
Inkjet 7.3 5.7 +28% 6.7 +9%
-------- -------- ------ -------- ------
Pad Printing 3.0 3.3 -9% 3.4 -12%
-------- -------- ------ -------- ------
Other 0.4 0.2 +100% 0.3 +33%
-------- -------- ------ -------- ------
Total 10.7 9.2 +16% 10.4 +3%
-------- -------- ------ -------- ------
Revenue from the EPS business increased by GBP1.5 million to
GBP10.7 million (H1 2022: GBP9.2 million).
This has been driven by digital inkjet machines sales with
growth of 28%, which is particularly pleasing as this is the core
focus for the business and will drive increased profitability. As
our focus has been on the core profitable single pass digital
machines, we have seen some decrease in revenue from the pad
printing stream, which we would expect to recover during H2 2023.
We see a strengthening pipeline and order book and we are well
placed to deliver further growth for the full year in 2023.
FFEI and Megnajet
FFEI revenue was GBP4.8 million which compares to GBP6.1 million
in H1 2022. This results from a focus on the core activities - that
of print systems - which was the driver for the acquisition.
Accordingly, the non-core activities of the business have seen
reduced revenue and we have stated that in time we will exit the
Life Science aspect of the business. We are pleased with the growth
of Megnajet which has delivered GBP0.8 million increase (133%), and
on a like-for like basis delivered a GBP0.4 million increase
(Megnajet was consolidated in March 2022). We have seen a change in
stock levels for some customers which has contributed to the
decrease compared to H2 2022.
Gross profit
Gross profit for the period decreased by GBP0.7 million to
GBP13.8 million (H1 2022: GBP14.5 million) with the gross margin
remaining at 40% (H1 2022: 40%). We have successfully mitigated
overhead cost increases, together with impact on profit from the
factory shutdown, to increase the Printhead business unit's gross
margin which grew to 44% from 41% (although due to the revenue
reduction gross profit reduced from GBP8.5 million from GBP7.9
million). We were able to do this through a combination of sales
price increases and improving utilisation of the factory, as
throughput was increased during the period resulting in better
overhead cost recovery, supporting gross margin gains.
Gross profit for the EPS business increased to GBP4.3 million in
the period from GBP3.6 million with gross margin growing
year-on-year (H1 2023: 40%, H1 2022: 39%). This reflects the focus
we have taken on modernising the business and adopting a modular
approach to designing and building machines with a focus on single
pass digital machines.
Gross profit for H1 2023 for the FFEI business was GBP1.3
million (H1 2022: GBP2 million), and for the Megnajet business was
GBP0.4 million (H1 2022: GBP0.3 million).
Research & Development
Gross R&D spend of GBP2.6 million was down GBP0.7 million in
H1 2023 (H1 2022: GBP3.3 million). On a like-for-like basis the
reduction was GBP0.3m. The reduction in the period comes from
reduced spend in FFEI in addition to an internal reallocation of
costs between General & Administrative costs and other areas of
the business. We are continuing to invest in the business and will
maintain the ratio of R&D investment/revenue of 8-10%.
Operating Expenses
Sales and marketing spend for the period was GBP3.2 million (H1
2022: GBP3.7 million). This decrease reflects the strong focus on
cost management that we have across the business.
General and administrative expenses increased to GBP10.3 million
from GBP6.0 million in H1 2022. On a like-for-like basis, the
increase was GBP3.1 million. The difference in variance relates to
an internal reclassification of costs of GBP1.2 million (moving
costs from General & Administrative expenses) made in H1 2022
that were not made in H1 2023.
Of the GBP3.1m increase in General and administrative expenses,
GBP1.1m are operational cost increases in the business as we have
continued to increase and strengthen our capability and experience
across the business, most notably in our R&D, Finance and Human
Resources functions. This improved operational capability also
includes further and continued investment in infrastructure such as
IT, manufacturing, and supply chain management.
Exceptional G&A costs (costs adjusted for adjusted profit
before tax) have increased GBP2.0 million principally due to an
increase in the share-based payments charge (IFRS 2) (GBP0.8
million increase) and GBP1.2m lower foreign exchange losses on
intra group transactions.
Other exceptional costs include GBP1.0m restructuring costs (of
which GBP0.8m relates to the factory efficiency programme) and
GBP0.5m reduction in the fair value of the contingent consideration
receivable due to foreign exchange movements.
Profit for the period
The adjusted profit before tax was GBP1.8 million in 2023 (H1
2022: GBP1.4 million).
The adjusted profit of the Printhead business decreased from a
GBP0.4 million loss in H1 2022 to a GBP2.2 million loss in H1 2023
driven by the reduction in revenue in the period. The EPS business
moved from an adjusted GBP1.1 million profit in 2022 to a GBP1.5
million profit in H1 2023 due to the increased trading performance.
FFEI contributed an adjusted profit before tax of GBP2.1 million in
the period, and Megnajet GBP0.4 million.
In calculating the adjusted profit before tax, we have adjusted
for fair value losses on financial assets of GBP0.5 million
alongside restructuring costs of GBP1.0 million, foreign exchange
losses on intra-group loans of GBP0.4 million, share-based payments
of GBP1.3 million and amortisation of acquired intangible assets of
GBP0.5 million.
The adjusted EBITDA in the period was GBP3.5 million (H1 2022:
GBP3.0 million). This was aided by the one-off profit arising from
the sale of non-core IP.
The total unadjusted loss for the period before tax was GBP1.8
million (H1 2022: GBP0.3m). Loss after tax was GBP1.3 million (H1
2022: profit of GBP0.4 million).
Balance sheet
The Group retains a strong balance sheet and a net cash position
at 30 June 2023 of GBP7.3 million. This represents a reduction of
GBP1.2 million in net cash since 31 December 2022, which has been
driven by planned capital investment and working capital
investment.
Non-current assets decreased slightly from GBP52.0 million at 31
December 2022, to GBP50.0 million in the first half of the year.
Property, plant, and equipment decreased by GBP0.6 million, driven
primarily by the depreciation of assets (GBP1.4 million), and
GBP1.0 million of capital additions. Goodwill and intangible assets
increased by GBP0.8 million which primarily related to foreign
currency exchange movements and the purchase of intangible assets.
The fair value of the non-current financial asset at fair value
through profit or loss which represents deferred contingent
consideration decreased by GBP0.7 million.
Current assets decreased by GBP1.7 million. Inventory value has
increased by GBP3.1 million, GBP1.7 million of which relates to an
increase in inventory held by the Printhead business. Trade and
other receivables decreased by GBP0.1 million. The fair value of
the current financial asset at fair value through profit or loss
decreased by GBP0.4 million.
Current liabilities increased by GBP0.9 million due mainly to
the change in current lease liability.
The Group maintains a strong disciplined focus on cash, and this
has continued through H1 2023. During H1 2023 investing activities
saw cash inflow of GBP1.7 million. As a result of the continued
managed investment in inventory, working capital saw an outflow of
GBP2.9 million. Maintenance capital additions were GBP1.2 million
in the period which together with the inventory investment was
funded by the IP sale proceeds of GBP2.3 million and GBP0.6 million
of cash earnout received on the sale of 3D Limited to
Stratasys.
The business has a clear plan and strategy which the strong
balance sheet and cash position will support. Currently we are
focussing investment on internal opportunities to ensure we have
the operational capacity and efficiency to meet future demand,
alongside investment in our product roadmap development.
Dividend
The Board regularly reviews capital allocation and believes that
prioritising investment to enable profitable growth for the
business is currently the most appropriate use of capital,
therefore, no interim dividend has been declared for 2023.
John Mills Ian Tichias
Chief Executive Officer Chief Financial Officer
19 September 2023
Directors' responsibilities statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with International Accounting Standard 34 - Interim
Financial Reporting as adopted by the UK
-- the interim management report includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By Order of the Board
John Mills
Chief Executive Officer
19 September 2023
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30
JUNE 2023
Six months Six months Twelve months
ended ended ended
30 June 31 December
2023 30 June 2022 2022
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
--------------------------------------------- ------ ------------ ------------- --------------
Revenue 3 34,515 36,608 72,782
Cost of sales (20,693) (22,118) (44,138)
--------------------------------------------- ------ ------------ ------------- --------------
Gross profit 13,822 14,490 28,644
Research and development expenses (2,617) (3,319) (6,718)
Research and development expenditure
credit - 79 379
Sales and marketing expenses (3,213) (3,665) (6,669)
General and administrative expenses (10,280) (5,954) (14,050)
Impairment losses of financial
assets (38) (46) (28)
Restructuring and transaction
expenses 2 (978) (226) (450)
Fair value loss on financial
assets at FVPL 10 (514) (1,469) (8)
Other income 4 2,201 - 139
Operating (loss)/profit (1,617) (110) 1,239
Investment income 5 37 22 38
Finance costs 5 (235) (213) (453)
--------------------------------------------- ------ ------------ ------------- --------------
(Loss)/profit before tax (1,815) (301) 824
Income tax credit 6 467 990 967
--------------------------------------------- ------ ------------ ------------- --------------
(Loss)/ profit for the period
from continuing operations (1,348) 689 1,791
Loss from discontinued operations
after tax 12 - (338) (159)
--------------------------------------------- ------ ------------ ------------- --------------
(Loss)/profit for the period (1,348) 351 1,632
--------------------------------------------- ------ ------------ ------------- --------------
(Loss)/earnings per share -
Total
Basic 7 (1.7p) 0.5p 2.1p
Diluted 7 (1.7p) 0.4p 2.0p
--------------------------------------------- ------ ------------ ------------- --------------
(Loss)/earnings per share - Continuing operations
Basic 7 (1.7p) 0.9p 2.3p
Diluted 7 (1.7p) 0.9p 2.2p
--------------------------------------------- ------ ------------ ------------- --------------
No dividends were paid in the current or prior period.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE
2023
Six months Six months Twelve months
ended ended ended
30 June 31 December
2023 30 June 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------- --------------
(Loss)/profit for the period
attributable to shareholders (1,348) 351 1,632
--------------------------------------- ------------ ------------- --------------
Exchange differences on translation
of net investment (315) 623 617
Other comprehensive (expense)/income
for the period (315) 623 617
--------------------------------------- ------------ ------------- --------------
Total comprehensive (expense)/income
for the period (1,663) 974 2,249
--------------------------------------- ------------ ------------- --------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
As at As at
31 December
30 June 2023 2022
Notes (unaudited) (audited)
-------------------------------------- ------ -------------- -------------
Non-current assets
Goodwill 9 6,903 7,163
Other intangible assets 8,184 8,681
Property, plant and equipment 15,536 16,104
Right of use asset 8,367 8,068
Financial asset at fair value
through profit or loss 10 10,438 11,089
Deferred tax asset 389 726
Other non-current assets 136 136
------ -------------- -------------
49,953 51,967
-------------------------------------- ------ -------------- -------------
Current assets
Inventories 32,168 29,148
Trade and other receivables 11,397 11,527
Current tax asset 1,182 735
Financial asset at fair value
through profit or loss 10 104 517
Cash and cash equivalents 7,303 8,546
-------------------------------------- ------ -------------- -------------
52,154 50,473
-------------------------------------- ------ -------------- -------------
Total assets 102,107 102,440
-------------------------------------- ------ -------------- -------------
Current liabilities
Trade and other payables (14,006) (14,862)
Provisions (430) (405)
Contract liabilities (4,090) (3,799)
Borrowings and financial liabilities 10 (1,060) (379)
Lease liabilities (1,823) (1,032)
(21,409) (20,477)
-------------------------------------- ------ -------------- -------------
Net current assets 30,745 29,996
-------------------------------------- ------ -------------- -------------
Non-current liabilities
Lease liabilities (7,315) (7,800)
Provisions (300) (300)
Other financial liabilities (1,740) (2,094)
(9,355) (10,194)
-------------------------------------- ------ -------------- -------------
Total liabilities (30,764) (30,671)
-------------------------------------- ------ -------------- -------------
Net assets 71,343 71,769
-------------------------------------- ------ -------------- -------------
Equity
Share capital 7,858 7,844
Share premium 29,443 29,427
Own shares (566) (775)
Translation reserves 1,313 1,628
Other reserves 24,563 23,379
Retained earnings 8,732 10,266
-------------------------------------- ------ -------------- -------------
Total equity 71,343 71,769
-------------------------------------- ------ -------------- -------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2023
Share Share Own Translation Other Retained Total
capital premium shares reserve reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- -------- -------- ------------ --------- ---------
Balances at 1 January 2023 7,844 29,427 (775) 1,628 23,379 10,266 71,769
--------------------------------------- -------- -------- -------- ------------ --------- --------- --------
Loss for the period - - - - - (1,348) (1,348)
Exchange differences on retranslation
of net investment - - - (315) - - (315)
Total comprehensive expense
for the period - - - (315) - (1,348) (1,663)
Own shares sold in the period - - 209 - - (178) 31
Share option exercises 14 16 - - - (8) 22
Credit to equity for equity-settled
share-based payments - - - - 1,184 - 1,184
--------------------------------------- -------- -------- -------- ------------ --------- --------- --------
Balance at 30 June 2023 7,858 29,443 (566) 1,313 24,563 8,732 71,343
--------------------------------------- -------- -------- -------- ------------ --------- --------- --------
Share Share Own Translation Other Retained Total
Capital premium shares reserve reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- -------- -------- -------- ------------ --------- --------- --------
Balances at 1 January 2022 7,844 29,427 (1,923) 1,011 21,820 10,623 68,802
--------------------------------------- -------- -------- -------- ------------ --------- --------- --------
Profit for the period - - - - - 351 351
Exchange differences on translation
of net investment - - - 623 - - 623
Total comprehensive income
for the period - - - 623 - 351 974
Own shares sold in the period - - 353 - - (200) 153
Own shares acquired in the
period - - (500) - - - (500)
Cash-settled share-based
payments - - - - - (249) (249)
Credit to equity for equity-settled
share-based payments - - - - 344 - 344
--------------------------------------- -------- -------- -------- ------------ --------- --------- --------
Balance at 30 June 2022 7,844 29,427 (2,070) 1,634 22,164 10,525 69,524
--------------------------------------- -------- -------- -------- ------------ --------- --------- --------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2023
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
-------------------------------------------- ----- ------------ ------------ --------------
(Loss)/profit before tax from Continuing
operations (1,815) (301) 824
Profit/(loss) before tax from Discontinued
operations - (338) (159)
Total (loss)/profit before tax (1,815) (639) 665
Adjustments for:
Share-based payments 1,274 435 1,748
Depreciation of property, plant and equipment 1,438 1,293 2,654
Depreciation of right of use assets 542 518 1,071
Amortisation of intangible assets 581 506 1,067
Impairment of assets - - 147
Research and development expenditure
credit - (79) (379)
Investment income (37) (22) (38)
Interest expense 235 213 453
Unrealised foreign exchange loss/(gain) 280 (838) (797)
Payment of cash settled share-based payments - (249) (249)
Fair value loss on financial assets at
FVPL 514 1,469 8
(Gain)/loss on disposal of property,
plant and equipment (11) 85 80
(Gain)/loss on disposal of intangible (2,036) - -
assets
Increase in provisions 25 20 141
--------------------------------------------------- ------------ ------------ --------------
Operating cash flows before movements
in working capital 990 2,712 6,571
Increase in inventories (3,167) (5,047) (9,462)
Increase in receivables (6) (3,383) (812)
Decrease in payables (1,044) (1,685) (1,914)
--------------------------------------------------- ------------ ------------ --------------
Cash used in operations (3,227) (7,403) (5,617)
Net income taxes received 340 211 112
--------------------------------------------------- ------------ ------------ --------------
Net cash used in operating activities (2,887) (7,192) (5,505)
-------------------------------------------- ----- ------------ ------------ --------------
Investing activities
Investment income 37 22 38
Purchases of property, plant and equipment (942) (1,470) (2,456)
Proceeds on disposal of property,
plant and equipment - 11 17
Purchase of intangible assets (257) - (2,933)
Proceeds on disposal of intangible
asset 2,312 - -
Cash earn-out received from financial
asset at FVPL 550 101 236
Acquisition of subsidiary (Megnajet),
net of cash acquired - (1,202) (1,202)
Asset acquisition (Technomation),
net of cash acquired - (2,334) (2,334)
-------------------------------------------- ----- ------------ ------------ --------------
Net cash generated from/(used in)
investing activities 1,700 (4,872) (8,634)
-------------------------------------------- ----- ------------ ------------ --------------
Financing activities
Proceeds from sale of own shares 32 181 408
Payment for own shares acquired - (500) (1,000)
Proceeds from issue of shares 30 - -
Payment of deferred consideration 11 - - (1,733)
Payment of lease liabilities and interest 11 (591) (422) (914)
Net inflows from invoice discounting
facility 11 649 - 346
Other interest paid 11 - - (22)
Net cash generated from/(used in)
financing activities 120 (741) (2,915)
-------------------------------------------- ----- ------------ ------------ --------------
Net decrease in cash and cash equivalents (1,067) (12,805) (17,054)
Effect of foreign exchange rate changes
on cash balances (176) 443 549
Cash and cash equivalents at beginning
of year 8,546 25,051 25,051
-------------------------------------------- ----- ------------ ------------ --------------
Cash and cash equivalents at end
of period 7,303 12,689 8,546
-------------------------------------------- ----- ------------ ------------ --------------
Cash and cash equivalents (which are presented as a single class
of asset on the face of the condensed consolidated statement of
financial position) comprise cash at bank and other short-term
highly liquid investments with a maturity of three months or less.
The carrying amount of these assets is approximately equal to their
fair value.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION
FOR THE SIX MONTHSED 30 JUNE 2023
1. Basis of preparation and accounting policies
Basis of preparation
These interim financial statements have been prepared in
accordance with the accounting policies set out in the Group's
Annual Report and Financial Statements 2022 on pages 122 to 129
(available at www.xaargroup.com) and were approved by the Board of
Directors on 19 September 2023. The interim financial statements
for the six months ended 30 June 2023 have been prepared in
accordance with IAS 34 "Interim Financial Reporting" as adopted by
the United Kingdom. The interim financial statements do not include
all the information and disclosures in the annual financial
statements and should be read in conjunction with the Group's
annual financial statements as at 31 December 2022.
The interim financial statements are unaudited, and they do not
constitute statutory financial statements as defined in section 434
of the Companies Act 2006. The comparative figures for the
financial year ended 31 December 2022 are derived from the Group's
statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditor and delivered to the
Registrar of Companies. The report of the auditor was (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498(2) or 498(3) of the Companies Act 2006.
Judgements and estimates
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the Group's consolidated Financial
Statements for the year ended 31 December 2022, with the addition
of an estimate of the split of the carrying value of
technology-based intangible asset which was part-disposed during
the period and the change in estimate of its remaining useful
economic life as detailed below.
On 23 June 2023 FFEI sold patents relating to its Life Science
business to a customer for GBP2,312,000, together with a transfer
of associated software and technological know-how over the course
of the following 18 months to 31 December 2024 for a separate
consideration. The patents sold were acquired by the Group on its
acquisition of FFEI in July 2021 and were not separately valued at
the time. Splitting the fair value of registered and unregistered
patents from their corresponding software and technological
know-how requires a significant degree of judgement. Management
used product gross margins and replacement cost estimates prepared
by external valuation experts at the original acquisition date to
estimate that, as at the date of disposal, the portion of the
carrying value of the technology-based intangible asset that
relates specifically to the patents sold was GBP276,000, leading to
a gain on disposal of GBP2,036,000 to be recognised in other income
note 4 in the consolidated income statement.
The remaining useful economic life of the remaining
technology-based intangible asset was reduced from 4 years to 1.5
years to align with terms of contract with the customer. This
change in estimate is accounted for prospectively and had an
immaterial impact on these interim financial statements.
Significant accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2022.
Principal risks and uncertainties
The Board has overall responsibility for the establishment and
oversight of the Group's risk management framework. The Board has
an established, structured approach to risk management, which
includes continuously assessing and monitoring the key risks and
uncertainties of the business. An outline of the key risks and
uncertainties faced by the Group is detailed on pages 48 to 57 of
the Xaar plc Annual Report and Financial Statements 2022, which is
available on the Group's website at www.xaargroup.com.
The Board has reviewed these risks as part of half year risk
assessment update including several changes which are reflected in
the Xaar plc Interim Report 2023. The potential impact of these
risks on our strategy and financial performance, together with
details of our specific mitigation actions, are set out in the Xaar
plc Annual Report and Financial Statements 2022, and at the back of
this Interim Report 2023 which includes all the key changes since
the Xaar plc Annual Report and Financial Statements 2022.
Going concern
The Board continuously reviews the performance of the business
and its future prospects, together with other factors likely to
affect its future development, performance and position. The Board
remains confident in the long-term future prospects for the Group
and its ability to continue as a going concern for the foreseeable
future.
The Group's day-to-day working capital requirements are expected
to be met through the current cash and cash equivalent resources at
the balance sheet date of 30 June 2023 of GBP7.3 million. As set
out in note 10, the Group has a GBP3 million invoice discounting
facility, of which GBP1.1 million was drawn as at 30 June 2023. The
Group also has access to a GBP5 million rolling credit facility
with a further GBP2.5 million accordion of which none has been
utilised as of 30 June 2023.
The Group has prepared and reviewed monthly profit and cashflow
forecasts which cover a period up to 31 December 2024, the going
concern period. This base case forecast position has been compiled
by considering the performance of the different businesses across
the Group and each of their funding requirements which represents
the current Board approved forecasts.
To support the going concern conclusion, a sensitivity analysis
has been performed, sensitising assumptions in revenue performance.
The outcome of this sensitivity analysis is that the Group can
maintain liquidity across the going concern period and will be able
to meet all forecasted obligations as they fall due. In addition,
covenant requirements on the rolling credit facility, namely
interest cover not falling below 4:1 and the leverage ratio not
exceeding 2.5 will continue to be met. A reverse stress scenario
has also been performed to model the circumstances required to
eliminate available liquidity during the going concern period. The
Directors believe the possibility of this combination of severe
downsides arising to be remote given the recurring revenue base and
predictability of forecasts, and that there are numerous
controllable mitigating actions such as deferring non-committed
capital expenditure and reducing performance related pay which
could be taken to avoid a liquidity breach.
Based on the above, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the period to 31 December 2024. For this reason, they
have adopted the going concern basis in preparing the financial
statements.
2. Reconciliation of adjusted financial measures
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
------------------------------------------ ------------ ------------ --------------
(Loss)/profit before tax from continuing
operations (1,815) (301) 824
------------------------------------------ ------------ ------------ --------------
Share-based payment charges 1,274 435 1,748
Exchange differences relating to
intra-group transactions 362 (792) (811)
Restructuring and transaction expenses 978 226 450
Research and development expenditure
credit - (79) (379)
Fair value loss on financial assets
at FVPL 514 1,469 8
Amortisation of acquired intangible
assets 519 486 982
------------------------------------------ ------------ ------------ --------------
Adjusted profit before tax from
continuing operations 1,832 1,444 2,822
Interest income (37) (22) (38)
Finance costs 235 213 453
Depreciation of property, plant
and equipment 1,438 1,293 2,654
Amortisation of intangible assets
(other than acquired intangibles) 62 20 85
Loss on asset disposal - 85 80
Impairment of assets - 147
------------------------------------------ ------------ ------------ --------------
Adjusted EBITDA from continuing
operations 3,530 3,033 6,203
------------------------------------------ ------------ ------------ --------------
EBITDA is calculated as statutory operating profit before
depreciation (other than that arising from IFRS16 accounting),
amortisation and impairment of property, plant and equipment,
intangible assets and goodwill. Adjusted EBITDA is calculated as
EBITDA excluding other adjusting items as defined.
Adjusted financial measures are alternative performance
measures, which adjust for recurring and non-recurring items that
management consider are not reflective of the underlying
performance of the Group. Recurring items are adjusted each year
irrespective of materiality to ensure consistent treatment.
Non-recurring items are identified and adjusted for by virtue of
their size or nature.
Share-based payment charges include the IFRS 2 charge for the
period of GBP1,184,000 (H1 2022: GBP344,000) and the expense
relating to National Insurance on the outstanding potential share
option gains of GBP90,000 (H1 2022: GBP91,000). These costs were
included in the general and administrative expenses in the
consolidated income statement.
Exchange differences relating to the operations in the United
States of America represent exchange gains or losses recorded in
the consolidated income statement as a result of intra-group
transactions in the United States of America. These costs were
included in general and administrative expenses in the consolidated
income statement.
Of the restructuring and transaction expenses in the first half
of 2023, GBP255,000 (2022: GBP226,000) relates to restructuring
costs. Cash expenditure arising from restructuring costs in the
first half of 2023 was GBP194,000 (H1 2022: GBP657,000). The
remaining cost of GBP753,000 in the period to 30 June 2023 relates
to the factory efficiency project (2022: nil), all of which is cash
expenditure.
The research and development expenditure credit relates to the
corporation tax relief receivable relating to qualifying research
and development expenditure. This item is shown on the face of the
consolidated income statement. Cash receipts of GBP361,000 received
during the period were in relation to the XaarJet Limited RDEC
claim which related to the financial year 31 December 2021
(GBP222,000) and the FFEI Limited RDEC claim for the nine-month
period to 31 December 2021 (GBP139,000).
The fair value loss on financial assets at fair value through
profit and loss relates to the sale of Xaar 3D Limited. The net
consideration includes contingent consideration that is valued and
reported at fair value. The fair value movement is recognised in
the income statement as fair value loss on financial assets at fair
value through profit and loss. In the period to 30 June 2023, the
movement on the financial asset represents foreign exchange loss on
retranslation of the asset at the period end.
The amortisation of acquired intangible assets relates to the
acquisition of FFEI Limited in 2021 and the acquisition of Megnajet
Ltd and Technomation Ltd in 2022. These include patents and
customer relationships for FFEI which are being amortised over 3.5
to 6 years for FFEI and IP, brand and customer relationships for
Megnajet and Technomation which are being amortised over 8 to 10
years. These costs were included in general and administrative
expenses in the consolidated income statement.
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
---------------------------------------- ------------ ------------ --------------
Basic (loss)/earnings per share
from continuing operations (1.7p) 0.9p 2.3p
---------------------------------------- ------------ ------------ --------------
Share-based payment charges 1.6p 0.6p 2.3p
Exchange differences relating to
intra-group transactions 0.5p (1.1p) (1.1p)
Restructuring and transaction expenses 1.3p 0.3p 0.6p
Research and development credit - - (0.5p)
Fair value gain on financial assets
at FVPL 0.7p 1.9p -
Amortisation of acquired intangible
assets 0.7p 0.6p 1.3p
Tax effect of adjusting items(1) - 0.1p (0.1p)
---------------------------------------- ------------ ------------ --------------
Adjusted basic earnings per share
from continuing operations 3.1p 3.3p 4.8p
---------------------------------------- ------------ ------------ --------------
(1) Tax effect of adjusting items is nil in 2023 due to all
adjustments being in UK tax jurisdiction which has unrecognised
accumulated tax losses so an effective tax rate of zero.
This reconciliation is provided to align with how the Board
measures and monitors the business at an underlying level, and is a
measure used in establishing remuneration.
3. Business segments
For management reporting purposes, the Group's operations are
analysed according to the four operating segments of 'Printhead',
'Product Print Systems' (EPS), 'Digital Imaging' (FFEI) and 'Ink
Supply Systems' (Megnajet). These four operating segments are the
basis on which the Group reports its primary segment information
and on which decisions are made by the Group's Chief Executive
Officer and Board of Directors, and resources allocated. Each
business unit is run independently of the others and headed by a
general manager. The Group's chief operating decision maker is the
Chief Executive Officer. There is no aggregation of segments for
disclosure purposes.
Ink Supply systems was added from 2 March 2022 as a result of
the Megnajet acquisition.
Segment information for continuing operations is presented
below:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Continuing operations GBP'000 GBP'000 GBP'000
----------------------- ------------ ------------ --------------
Revenue
Printhead 17,618 20,658 39,042
Product Print Systems 10,697 9,227 19,624
Digital imaging 4,769 6,108 11,633
Ink supply systems 1,431 615 2,483
Total revenue 34,515 36,608 72,782
----------------------- ------------ ------------ --------------
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Continuing operations GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ --------------
Result
Printhead (2,852) (1,149) (12)
Product Print Systems 955 1,115 2,756
Digital imaging 1,258 43 (142)
Ink supply systems 296 316 385
------------------------------------ ------------ ------------ --------------
Total segment result (343) 325 2,987
Net unallocated corporate expenses (1,274) (435) (1,748)
------------------------------------ ------------ ------------ --------------
Operating (loss)/profit (1,617) (110) 1,239
Investment income 37 22 38
Finance costs (235) (213) (453)
------------------------------------ ------------ ------------ --------------
(Loss)/profit before tax (1,815) (301) 824
Tax 467 990 967
------------------------------------ ------------ ------------ --------------
(Loss)/profit for the period (1,348) 689 1,791
------------------------------------ ------------ ------------ --------------
Unallocated corporate expense relates to administrative
activities which cannot be directly attributed to any of the
principal product groups, consisting of share-based payment
charges.
4. Other income
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
--------------------------------------- ------------ ------------ --------------
Government grants - - 139
Profit from sale of patent intangible 2,036 - -
assets
Other 165 - -
--------------------------------------- ------------ ------------ --------------
Total other income 2,201 - 139
--------------------------------------- ------------ ------------ --------------
On 23 June 2023, FFEI sold patents relating to its Life Sciences
business to a customer for GBP2,312,000. These Patents had a NBV in
the group consolidated accounts of GBP276,000 and as such a profit
on disposal of GBP2,036,000 has been recognised.
Other, comprises compensation received due to a legal claim.
In 2022, government grants were received from the UKRI Future
Leaders Fellowship scheme by FFEI. Further details can be obtained
by referring to note 7 within the Group's financial statements for
the year ended 31 December 2022.
5. Interest receivable and payable
Investment income
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
-------------------------------------- ------------ ------------ --------------
Interest receivable on cash and bank
balances, and treasury deposits 37 22 38
-------------------------------------- ------------ ------------ --------------
Finance costs
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
------------------------------------------------ ------------ ------------ --------------
Interest on invoice securitisation/discounting 32 3 33
Interest on leases 131 118 242
Interest on borrowing costs 6 - -
Other interest costs 66 92 178
------------------------------------------------ ------------ ------------ --------------
235 213 453
------------------------------------------------ ------------ ------------ --------------
6. Income tax
The major components of income tax (credit)/charge in the income
statement are as follows:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
------------------------------------------ ------------ ------------ --------------
Current income tax
UK (306) - (269)
Overseas 46 9 87
------------------------------------------ ------------ ------------ --------------
(260) 9 (182)
Adjustment in respect of prior year (501) 96
------------------------------------------ ------------ ------------ --------------
Total current income tax (credit)/charge (761) 9 (86)
Deferred income tax -
Relating to origination and reversal
of temporary differences 294 (999) (881)
Total deferred tax charge/(credit) 294 (999) (881)
Income tax (credit)/charge reported
in the statement of profit and loss (467) (990) (967)
Income tax (credit)/charge attributable - - -
to discontinued operations
------------------------------------------ ------------ ------------ --------------
Total Income tax credit (467) (990) (967)
------------------------------------------ ------------ ------------ --------------
The Finance Act 2021, which was substantively enacted on 10 June
2021, amended the main rate of corporation tax in the UK from 19%
to 25% from 1 April 2023. The H1 taxation has been computed on a
blended tax rate for 2023. However, due to the unrecognised
accumulated tax losses and the R&D tax credits, the effective
tax rate in UK jurisdiction Group companies is negative. The UK tax
credit is in relation to R&D tax credits.
The overseas tax charge is in relation to the USA EPS business
unit where the federal tax rate is 21% and the effective tax rate
is 19%.
The closing deferred tax asset as at 31 December 2022 and 30
June 2023 is due to the accumulated tax losses of the Group's USA
companies and has been calculated using the US tax rates at which
the deferred tax asset is expected to be reversed in future
periods.
Whilst the Board believes in the long-term potential and
profitability of the Printhead business unit, the forecast taxable
losses over the next couple of years mean that the UK tax losses
will not be utilised in the short term. Therefore, no deferred tax
asset has been recognised relating to UK losses for 30 June 2023.
As at 31 December 2022, the Group has unused capital losses of
GBP1.1 million available for offset against future gains. These
losses may be carried forward indefinitely.
In the year ending 31 December 2022, the Group claimed R&D
tax relief and R&D expenditure credit (RDEC), where the R&D
credit receivable is included in operating loss. In the current
reporting period, the Group is claiming only R&D tax relief,
though there may be RDEC to claim in H2 2023.
7. Earnings per ordinary share - basic and diluted
The calculation of basic and diluted earnings per share is based
upon the following data:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------- ------------- --------------
Earnings
(Loss)/earnings for the purposes of
earnings per share being net (loss)/profit
attributable to equity holders of
the parent (1,348) 351 1,632
--------------------------------------------- ------------- ------------- --------------
from continuing operations (1,348) 689 1,791
from discontinued operations - (338) (159)
--------------------------------------------- ------------- ------------- --------------
Number of shares
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 78,117,147 77,657,189 77,549,264
Effect of dilutive potential ordinary
shares:
Share options 726,499 1,481,799 4,085,096
--------------------------------------------- ------------- ------------- --------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 78,843,646 79,138,988 81,634,360
--------------------------------------------- ------------- ------------- --------------
Pence per Pence per
Pence per share share share
31 December
30 June 2023 30 June 2022 2022
------------------------- ---------------- ------------- ------------
Basic (1.7p) 0.5p 2.1p
Diluted (1.7p) 0.4p 2.0p
------------------------- ---------------- ------------- ------------
Continuing operations
Basic (1.7p) 0.9p 2.3p
Diluted (1.7p) 0.9p 2.2p
------------------------- ---------------- ------------- ------------
Discontinued operations
Basic - (0.4p) (0.2p)
Diluted - (0.4p) (0.2p)
------------------------- ---------------- ------------- ------------
Adjusted
Basic 3.1p 3.3p 4.8p
Diluted 3.1p 3.2p 4.5p
------------------------- ---------------- ------------- ------------
Potential ordinary shares are treated as dilutive if their
conversion to ordinary shares would decrease earnings per share or
increase loss per share.
Adjusted earnings per share is earnings per share adjusted for
the items as indicated in note 2.
8. Share capital and own shares
During the six months ended 30 June 2023 a total of 137,552 new
ordinary shares of 10 pence each were issued under the Company's
LTIP and Share option schemes for GBP29,507. During the six months
ended 30 June 2022, there were no new ordinary shares issued.
During the six months ended 30 June 2023, 85,459 shares (H1
2022: 128,533) were used by the ESOP to satisfy share award
exercises with no shares purchased by the ESOP (H1 2022: ESOP
purchased 221,751 shares for GBP0.5 million).
9. Goodwill
The carrying amount of goodwill at 30 June 2023 was GBP6,903,000
(31 December 2022: GBP7,163,000).
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash-generating units (CGUs) that are expected
to benefit from that business combination. Goodwill occurred from
the acquisition of Engineered Printing Solutions (EPS) in July
2016, FFEI Limited in July 2021 and Megnajet in March 2022.
30 June 31 Dec
2023 2022
GBP'000 GBP'000
-------------------------------------------- -------- --------
Balance at the beginning of the year 7,163 5,894
Addition - acquisition of Megnajet (2021:
FFEI) - 661
Foreign currency translation (260) 608
Balance at the end of the year 6,903 7,163
-------------------------------------------- -------- --------
As part of the reportable segments, goodwill amounting to
GBP5,553,000 is attributed to Product Print Systems (a single CGU),
GBP689,000 is attributed to FFEI (a single CGU), and GBP661,000 is
attributed to Megnajet (a single CGU).
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired. No impairment has been identified and therefore no
impairment loss has been recognised during the current and
preceding period.
The recoverable amount of the CGU is determined from a
value-in-use calculation. The annual impairment review for Product
Print Systems and Megnajet will continue to be performed on 31
December each year.
FFEI Limited goodwill impairment review:
As at 30 June 2023, due to an agreement to transfer a material
portion of the Life Sciences business to client, over the period 23
June 2023 to 31 December 2024, an impairment indicator was
identified in respect of goodwill allocated to FFEI Limited. As a
result, a review for impairment was performed on a value in use
basis. Following this review, no impairment was recognised. A cash
flow forecast was prepared for a period to 31 December 2027 based
upon the strategic plan for the business and a terminal value
determined using a 2% growth rate in FFEI Limited, based on the
Bank of England Long term target inflation rate.
To evaluate the risk of impairment, the Group adjusted its cash
flows over the forecast period to reflect constraints on key
assumptions including new product introductions, regional expansion
and growth rates of existing products. These adjusted cash flows
are based on the forecast as described and bring a reduction of
GBP3 million to the 31 December 2022 value in use. The discount
rate applied to the cash flow projections is 15.3%, this was
calculated by updating the year end rate obtained from external
third-party advice for observable market inputs. Where market
observable inputs were not available consideration was given to the
historic performance of the input and the sensitivity of the input
to market changes since year end. The discount rate reflects the
risk-free rate, equity beta and local market premium as calculated
at 30 June 2023 with an additional 1% company specific risk
premium.
The recoverable amount calculated based on the base case
forecast set out above exceeds the carrying value of the FFEI
Limited CGU by GBP2.6 million. Sensitivity analysis has been
performed, flexing assumptions regarding expected sales volumes,
sales mix and margins to determine the recoverable amount of the
CGU. Further stress testing has been completed on each key
assumption (Revenue, Discount Rate and Long-Term Growth Rate) for
the FFEI Limited business.
The carrying amount of goodwill would exceed its recoverable
amount, when compared to the adjusted cash flows, if the following
'reasonably possible changes' were to occur:
-- An average decline of 35% in forecast volumes of Printbar
sales over the forecast period; or
-- An increase in the discount rate by 3.2%
10. Financial instruments
Fair value of the Group's financial assets and financial
liabilities that are measured at fair value on a recurring
basis:
Some of the Group's financial assets and financial liabilities
are measured at fair value at the end of each reporting period. The
following table gives information about how the fair value of these
financial assets and financial liabilities are determined (in
particular the valuation technique(s) and inputs used).
Relationship and
sensitivity of
Financial asset/ Valuation technique(s) Significant unobservable unobservable inputs
financial liabilities and key input(s) input(s) to fair value
----------------------- ----------------------------- ------------------------- -----------------------------
Financial asset Monte Carlo Simulation Revenue volatility 10% increase/(decrease)
at fair value model in revenue volatility
through profit would result in
or loss (Level GBP7,000 and GBP11,000
3) decreases in fair
value respectively.
Risk-adjusted discount
rate 1% increase/(decrease)
in discount rate
would result in
GBP12,000 decrease
and GBP14,000 increase
in fair value respectively.
-----------------------------
The following variables
were taken into
consideration:
revenue projections,
management forecast
and discount rate.
The milestone consideration
and 3% earn-out
consideration are
calculated based
on the terms of
the proposed transaction
and by reference
to simulated revenue.
This is then discounted
back to the valuation
date using a discount
rate over a period
commensurate with
the year in which
payments are payable.
-----------------------------
There were no transfers between Level 1 and 2 during the current
or prior year.
Reconciliation of Level 3 fair value measurements of financial
instruments:
On 1 November 2021, the sale of Xaar 3D Limited to Stratasys was
completed and Xaar received net cash of GBP9,272,000 and contingent
consideration of GBP10,863,000. The contingent consideration had a
fair value of GBP11,606,000 as at 31 December 2022. The contingent
consideration is recognised as financial asset at fair value
through profit or loss. During the period, Xaar received an
earn-out income amounting to $691,000 or GBP550,000. The fair value
of the contingent consideration as at 30 June 2023 is
GBP10,542,000. All of the fair value loss in the currently
reporting period is due to the weakening of the USD against the
British pound.
Six months Six months Twelve months
ended ended ended
31 December
30 June 2023 30 June 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------ ------------- ------------- --------------
Balance at 1 January 11,606 11,850 11,850
Earn out received (550) (101) (236)
Fair value loss on financial
assets at FVPL (514) (1,469) (8)
------------------------------- ------------- ------------- --------------
Balance at period end 10,542 10,280 11,606
------------------------------- ------------- ------------- --------------
Current asset 104 684 517
Non current asset 10,438 9,596 11,089
------------------------------- ------------- ------------- --------------
10,542 10,280 11,606
Short-term borrowings
Short term borrowings include an advance against customer
invoices assigned to a third party as part of an invoice
discounting arrangement. At the reporting date the carrying value
of the customer invoices assigned and associated liabilities
were:
Six months Six months Twelve months
ended ended ended
31 December
30 June 2023 30 June 2022 2022
(unaudited) (unaudited) (audited)
Invoice discounting facility GBP'000 GBP'000 GBP'000
------------------------------ ------------- ------------- --------------
Gross invoice value assigned 1,774 - 2,851
Advance drawn (1,060) - (379)
Net position 714 - 2,472
------------------------------- ------------- ------------- --------------
Interest on the invoice discounting facility is charged daily
when the facility is in an overdrawn position at a rate equivalent
to the appropriate base rate +1.75% pa. There is an annual service
fee of GBP25,000 charged monthly, and there was a one-off
arrangement fee to open the facility of GBP10,000. No interest is
payable on the unutilised element on the facility.
The facility limit was GBP5 million as at 30 June 2023 and
operates for a minimum of twelve months from inception (September
2022). The facility can be cancelled with a three-month notice
period. There are no covenants attached to the invoice discounting
facility. Subsequent to the reporting date, the facility limit was
reduced to GBP3 million which is still in excess of the eligible
invoice value expected for the foreseeable future.
Eligible debts in GBP and USD denomination are legally assigned
to the facility provider as, or soon after, they are raised. The
facility makes available 90% of the debts to Xaar Jet Limited,
subject to certain monetary funding limits and concentration
percentages by customer. XaarJet Limited remain responsible for
collecting the debts as the collection agent for the finance
provider and the remittances are made into an account held for the
benefit of the finance provider, the balance of which is held as a
liability in XaarJet Limited.
No fair value adjustments are deemed necessary for these
amounts; however, the receivables are subject to an allowance for
doubtful debt. The invoice discounting facility is secured with
fixed rate charges over purchased debts and a floating charge over
the assets of Xaar Jet Ltd.
It remains the entity's responsibility to appropriately insure,
manage and recover the debts assigned under the arrangement, and
the transferred assets are subject to recourse at any time. This
means the Group retained substantially all the risks and rewards
and the control over the assets, thus derecognition criteria of
accounts receivable were not met.
Revolving Credit Facility
On 14 June 2023, Xaar PLC entered into a Revolving Credit
Facility (RCF) agreement of GBP5 million, which matures on 14 June
2025, with an option to extend for a further year, subject to
lender approval. The agreement includes an accordion option of a
further GBP2.5 million which can be requested at any time during
the facility period, subject to lender approval and relevant
fees.
Issue costs of GBP125,000 associated with the implementation of
the facility have been recorded in the balance sheet and will be
amortised across the life of the facility (24 months).
The facility bears an interest rate of the Sterling Overnight
Indexed Average (SONIA) rate plus 2.35% margin, with a charge of
40% of the margin chargeable on undrawn and uncancelled amounts of
the RCF.
The facility is secured by fixed and floating charges over the
assets of the Group.
Interest cover, leverage and capital expenditure covenants are
in place which are measured quarterly, based on the Group financial
statements. The Group monitors compliance of the covenants on an
ongoing basis. As at 30 June 2023, the Group remains compliant with
the covenants.
At 30 June 2023, no drawings had been made under the RCF.
11. Reconciliation of liabilities arising from financing
activities
Foreign As at
As at Cash exchange 30 June
31 Dec 2022 flows Additions Interest movement 2023
Lease liabilities 8,832 (591) 825 131 (60) 9,137
Deferred consideration 3,740 - - 66 - 3,806
Invoice discounting
facility 379 649 - 32 - 1,060
Other interest incurred
and paid - - - 6 - 6
------------------------- ------------------------ ------- ---------- --------- ---------- ---------
12,951 58 825 235 (60) 14,009
------------------------- ------------------------ ------- ---------- --------- ---------- ---------
As
at 31 Foreign As at
Dec Cash exchange 31 Dec
2021 flows Additions Interest movement 2022
Lease liabilities 9,191 (914) 323 242 (10) 8,832
Deferred consideration 4,943 (1,733) 374 156 - 3,740
Invoice discounting facility - 346 - 33 - 379
Other interest incurred and
paid - (22) - 22 - -
------------------------------ -------- -------- ---------- --------- ---------- ---------
14,134 (2,323) 697 453 (10) 12,951
------------------------------ -------- -------- ---------- --------- ---------- ---------
12. Discontinued operations
The Thin Film business which was discontinued in 2019 incurred
costs in 2021 and 2022 which mainly related to supplier and
customer liabilities and inventory for last time buy sales. All
liabilities have now been settled and we maintain an amount of
inventory that is fully provided and not likely to be sold.
The results of Thin Film related activities for the period are
shown below:
Six months Six months Twelve months
ended ended ended
30 June 30 June 3 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Thin Film GBP'000 GBP'000 GBP'000
------------------------------------------ -------------- ------------ --------------
Expenses - (338) (159)
--------------------------------------------- -------------- ------------ --------------
Loss after income tax from discontinued
operations - (338) (159)
--------------------------------------------- ------------- ------------ --------------
The net cash flows incurred by Thin Film are as follows:
Thin Film GBP'000 GBP'000 GBP'000
--------------------------------------- --- --- --- ---------- -------- --------
Net cash outflow from operating
activities - (394) (150)
------------------------------------------------------ ---------- -------- --------
Net decrease in cash generated from
discontinued operations - (394) (150)
------------------------------------------------------ --------- -------- --------
Loss per share
Basic loss for the period from
discontinued operations - (0.4p) (0.2p)
Diluted loss for the period from
discontinued operations - (0.4p) (0.2p)
-------------------------------------------------- ---------- -------- --------
13. Date of approval of interim financial statements
The interim financial statements cover the period 1 January 2023
to 30 June 2023 and were approved by the Board on 19 September
2023.
Further copies of the interim financial statements are available
from the Company's registered office, 3950 Cambridge Research Park,
Waterbeach, CB25 9PE, and can be accessed on the Xaar plc website,
www.xaargroup.com .
Risks and uncertainties
Several potential risks and uncertainties exist which could have
a material impact on the Group's performance over the second half
of the financial year and could cause actual results to differ
materially from expected and historical results.
The Group has continued identifying, evaluating, and managing
the key risks which could impact the Group's performance over the
six months to 30 June 2023.
The full list of principal risks identified at the year-end and
a description of how they relate to the Group's strategy and the
approach to managing them are set out on pages 52 to 57 of the Xaar
plc Annual Report and Financial Statements 2022, which is available
on the Group's website at www.xaar.com.
Management and the Board have reviewed these risks and concluded
they will continue to remain relevant for the second half of the
financial year. The principal risks as at 30 June 2023, showing any
changes from the 2022 year-end disclosure, are summarised in the
table below:
Risk Area: Market
Description Likelihood/Magnitude Changes since 31 December
2022
--------------------- ----------------------------------
1. Competition Unlikely/Very No change
Monitoring and adjusting high
to competitive dynamics
such as pricing/promotion,
innovation, resource
investments and
market share changes
--------------------- ----------------------------------
2. Failure to identify Unlikely/Very No change
market requirements high
Successfully developing
products with the
characteristics
that meet market
requirements within
the necessary timescale.
--------------------- ----------------------------------
3. Commercialising Possible/High No change
and
maintaining products
with
cutting edge technology
Creating value by
generating innovative
products that deliver
significant customer
benefit.
--------------------- ----------------------------------
4. Merger and acquisition Possible/Medium Reduced
opportunities
Our strategy is Less M&A activity in the
predicated primarily period.
on organic growth.
Seek opportunities
to expand, create
synergies and generate
greater shareholder
value.
--------------------- ----------------------------------
Coronavirus (COVID-19 Removed All travel and trade restrictions
and variants ) lifted following the end
External tracking of the pandemic.
and adjusting to
the potential global
impact and external
risks arising from
pandemic response
and impact on customers/supply
chain.
--------------------- ----------------------------------
Risk Area: Operational
Description Likelihood/Magnitude Changes since 31 December
2022
--------------------- ----------------------------------
5. Climate change Possible/Medium No change
Identifying risks
and scenario planning
of physical and
transition impact
upon operations
and developing mitigating
actions.
--------------------- ----------------------------------
6. Organisational Possible/Medium No change
capability
Having the right
people in the right
roles.
--------------------- ----------------------------------
7. Partnerships Possible/Medium No change
and alliances
Working with the
right companies,
at the right time
on the right terms
to deliver long-term
value.
--------------------- ----------------------------------
8. Supply chain Unlikely/High No change
Optimising sourcing
and supply chain
relationships to
drive performance
and minimise operational
issues.
--------------------- ----------------------------------
9. War in Ukraine Possible/Medium Reduced
and the
world economy The consequences are better
The war in Ukraine understood, and the work
has materially altered is completed to mitigate
the near-term outlook the impact of the war on
for the UK and global the global economy.
economies and increased
uncertainty over
the path ahead.
Energy prices are
by far the greatest
concern for the
UK economy which
also result in further
upward pressure
on inflation and
a potential hit
to GDP growth over
the next two years.
--------------------- ----------------------------------
10. Laws and regulations Possible/High Increased
Compliance with
key laws and regulations The new Company Secretary
in all countries undertook a more detailed
Group operates in. assessment than conducted
in the past, of the impact
of the relevant laws and
regulations to better understand
the risks to the Group
--------------------- ----------------------------------
Risk Area: IT
Description Likelihood/Magnitude Changes since 31 December
2022
--------------------- ----------------------------------
11. IT systems Possible/High No change
and
control environment
Strengthen IT infrastructure
and key IT systems.
Enhance and build
resilience by investing
in and implementing
new IT infrastructure
or IT systems.
--------------------- ----------------------------------
12. Cyber security Possible/Medium No change
risk
Loss of systems
or confidential
data due to a malicious
cyber-attack, leading
to disruption to
business operations
and loss of data.
--------------------- ----------------------------------
Risk Area: Financial
Description Likelihood/Magnitude Changes since 31 December
2022
--------------------- ----------------------------------
13.Ability to access Unlikely/High No change
sufficient capital
Ability to access
sufficient capital
to fund growth opportunities.
--------------------- ----------------------------------
14. Customer credit Possible/Low No change
exposure
Offering credit
terms ensuring recoverability
is reasonably assured.
--------------------- ----------------------------------
15. Inventory obsolescence Probable/High No change
Holding excess inventory
levels when compared
to demand, that
leads to increased
risk of obsolescence
and write-off before
consumption.
--------------------- ----------------------------------
16. Exchange rates Probable/Medium No change
Monitoring global
economic events
and mitigating any
resulting significant
exchange rate impacts
--------------------- ----------------------------------
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END
IR GPUGPBUPWPPR
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September 19, 2023 02:00 ET (06:00 GMT)
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